“A lie gets halfway around the world before the truth has a chance to get its pants on.”
Winston Churchill
Canada won the Gold Medal
We have quite a bit of breaking news to share with you this week. Perhaps the most important news to share, if you are Canadian, is that Canada won the Gold Medal in the World Junior Hockey Tournament against the Russians in a 4-3 victory coming from behind 3-1 going into the third period. Congratulations to our Canadian readers – well done!
2020 The Year of Geopolitical Risks
Well folks, we are entering the year with a lot of geopolitical risk. Iran, Russia and China got together practicing some war games at the same time we are in the final throes of negotiating stage one of the China/US trade deal. China continues to have problems at home as protests continue. Iran attacked our embassy and Trump retaliated by taking out Qassem Soleimani with a drone at the Baghdad Airport. Iran is now warning of retaliation.
Just yesterday the Iraqi Parliament, in a surprise vote, voted in favor of expelling U.S. Troops from their country. Trump says the U.S. will not leave unless Iraq repays billions of dollars for airbases and other infrastructure. We don’t see any good that is going to come out of the departure of U.S. troops from Iraq other than crude going up (up nearly 4% on Friday), which is good news for rail and U.S. producers.
Crude Oil Markets
In overnight markets, crude surged further and we expect a positive open this morning. We expect a surge in U.S. rig count activity over the next few months as frac sand producer’s hedge and E&Ps get to work drilling to backfill presold crude. The storing of rail cars, although still robust, has slowed down (see PFL storage report) and we could see on the back of recent events some freeing up of hoppers and tank cars, a positive for rail.
Despite this, West Texas won’t see any rail cars anytime soon as five new oil pipelines are set to open in the Permian Basin through 2021, expanding a gap between production and takeaway capacity that’s already forcing companies to cut fees and could mean lower profits and cutthroat competition ahead. The leaving of U.S. troops from Iraq would pave the way for Iran to take over that country which, while negative for US interests, will only fuel an already bullish energy complex.
The Economy
The economy despite all the political uncertainty looks pretty good folks. Housing starts are up as low U.S. interest rates are attracting more buyers – 70% of house builders are bullish. 266,000 net new jobs were created in November. Unemployment fell to 3.5% in November. Consumer confidence is still high standing at 125.5. Consumer spending is robust.
North American Rig Count
North American Rig count is down 23 rigs week over week with the U.S. losing 9 and Canada losing 14 rigs. Year over year we are down 270 rigs collectively.
Total North American rail volumes were down 7.3% year over year in week 52 (U.S. -9.2%, Canada -1.0%, Mexico -7.2%), resulting in fourth quarter volumes that were down 7.4% and 2019 volumes that were down 4.0% (U.S. -5.0%, Canada -0.4%, Mexico -2.9%). 9 of the AAR’s 11 major traffic categories posted year over year decreases with the largest declines coming from intermodal (-7.6%), coal (-11.5%), grain (-19.1%), motor vehicles & parts (-16.9%) metallic ores & metals (-4.9%) and nonmetallic minerals (-6.3%). The largest increase came from farm products & food (+8.1%).
In the East
CSX’s total volumes were down 5.9%, with the largest decreases coming from intermodal (-5.3%) and coal (-10.2%). NS’s total volumes were down 14.0%, with the largest decreases coming from intermodal (-10.0%), coal (-27.6%), grain (-35.4%) and motor vehicles & parts (-19.6%).
In the West
BN’s total volumes were down 6.4%, with the largest decreases coming from intermodal (-8.3%), grain (-21.8%), petroleum (-15.2%) and stone sand and gravel (-25.3%). The largest increase came from coal (+4.6%). UP’s total volumes were down 10.4%, with the largest decreases coming from intermodal (-13.9%) and coal (-30.6%). The largest increase came from petroleum (+21.0%).
In Canada
CN’s total volumes were down 4.9% with the largest decreases coming from intermodal (-5.9%), grain (-30.0%) and chemicals (-10.7%). RTMs were down 7.6%. CP’s total volumes were up 7.9%, with the largest increases coming from intermodal (+13.9%) and farm products (+82.6%). The largest decrease came from grain (-15.6%). RTMs were up 7.6%.
Kansas City Southern
KCS’s total volumes were down 0.1%, with the largest decrease coming from intermodal (-5.7%).
The market is extremely active. Storage continues to get fuller with many people expanding their operations to accommodate increased demand, be careful folks we think that rail car storage demand may be peaking cars are looking to come out. .
We have been busy with all sorts of subleases, trouble shooting for return on lease programs which activity has increased dramatically as we approach year-end.. Call PFL today for the latest and greatest!
Hot Markets
PFL is offering longer term pressure cars with a free move on the CSX or BN. 4750cu covered hoppers for sale or lease. Clean and/or last in refined products, 31.8k’s & various 117’s available for lease or purchase. 20k tankers for lease or purchase. 6200cu 286GRL plastic pellet covered hoppers. Bulk head & center beam flats for lease (riser or riserless). mil gons for lease or purchase. Various Boxcars for lease. Call for details today!
PFL is seeking 117J’s last in ethanol service for lease. 286GRL boxcars for purchase, 286GRL wood chip gons for purchase, as well as pressure cars for the winter term lease or purchase.
Live Railcar Markets
| CAT | Type | Capacity | GRL | QTY | LOC | Class | Prev. Use | Clean | Offer | Note |
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